Patricof, Early AOL Backer, Wins With Huffington

Alan Patricof, seen here, says Huffington asked him to write a blog for her website several years ago, prompting him to approach her about making an investment in the firm. Photographer: Jamie Rector/Bloomberg

Feb. 8 (Bloomberg) -- Alan Patricof’s investment in America
Online when it was a startup in the early 1980s came full circle
when AOL Inc. said yesterday it was acquiring the Huffington
Post, another one of his ventures, for $315 million.

“What goes around comes around, in a good way,” Patricof,
whose 40-year career in the venture-capital industry includes
early investments in Apple Inc., said in a telephone interview
yesterday. “It’s been a successful investment for everyone.”

The deal makes New York-based Huffington Post, a political
blog known as much for its outspoken leader as its content, the
best investment so far for Greycroft Partners LLC. Patricof
founded the venture fund in 2006 after heading private-equity
firm Apax Partners for more than three decades. Greycroft led $5
million investments in Huffington Post in 2006 and 2007.

Patricof, 76, started Greycroft in New York, and later
opened an office in Los Angeles. Since its inception, Greycroft
has focused on digital media and entertainment. That’s set it
apart from other firms in venture capital’s Silicon Valley
center, 3,000 miles (4,828 kilometers) away. Now Patricof is
taking stakes in digital-media companies that are trying to turn
millions of viewers into advertising dollars.

“In New York, Alan is the godfather of VC,” said Joe
Fernandez, founder of Klout Inc., a Web startup that received
funding last month from Greycroft and Kleiner Perkins Caufield &
Byers. “He’s so respected and so connected in the media world
that I knew we had to work with him.”

Blog Invitation

Huffington Post has grown to 25 million users a month since
its debut in 2005, according to research firm ComScore Inc. Co-founder Arianna Huffington, who gained prominence as a
conservative commentator before her views moved to the left in
the 1990s, will become president and editor-in-chief of the
Huffington Post Media Group.

Patricof says Huffington asked him to write a blog for her
website several years ago, prompting him to approach her about
making an investment in the firm.

“I thought she was a star, with the right combination of
personality and depth of knowledge in the political area to make
something like this work,” Patricof said. He declined to say
what return he made on the investment in Huffington Post.

Known for his ties with top Democratic leaders such as
former President Bill Clinton and U.S. Secretary of State
Hillary Clinton, Patricof raised money for them at various
times, including for Hillary Clinton’s 2008 campaign for
president.

Thinking Exit

Patricof, who gets into work well before 7 a.m. and
typically doesn’t leave until after 7 p.m., says he stays in
touch with trends by tirelessly seeking out entrepreneurs and
technology companies, sometimes meeting executives on weekends.

“Being in this business means you have to be alert and on
your toes,” Patricof said.

Greycroft raised $75 million for its first fund in 2006 and
followed that with a $130 million fund in 2010. The firm has
raised smaller funds than many of its top Silicon Valley
competitors for two reasons, according to its website. First,
the Internet has made it cheaper to start companies. And second,
large firms tend to “over-capitalize” startups, limiting the
opportunities to make money from an acquisition.

“When you make an investment today in the venture world in
an early-stage company, your focus is not specifically on taking
it public,” Patricof said in a Dec. 20, 2007, interview with
Bloomberg Television. “You have to really think about an exit
strategy, which involves a sale to another company or merger in
order to get big.”

Media Backing

The firm is focused on Internet companies, digital media
and the delivery of content through mobile devices, Patricof
said.

Another online content site Greycroft invested in early was
PaidContent.org, a news service that covers media and technology
companies. U.K. publisher Guardian Media Group Plc purchased
paidContent.org’s parent, ContentNext Media, in 2008 for an
undisclosed price. Greycroft’s portfolio also includes
investments in online ad companies Ad.ly and Glam Media Inc. and
Web publisher Crowd Fusion Inc.

Patricof founded his eponymous venture-capital firm in 1969
to invest in early stage companies that needed money to grow.
Prior to that, he was vice president at Central National Corp.,
the pulp and paper company owned by the Gottesman family. He
founded and was chairman of the board of New York magazine, and
he oversaw that magazine’s acquisition of The Village Voice.

Apple Investor

Patricof was among the earliest investors in Apple, the
company started as Apple Computer in a garage in California’s
Silicon Valley, and Office Depot Inc.

In 1977, Patricof’s firm joined forces with another
investment firm, Multinational Management Group. In 1990, the
European business of that firm was renamed Apax Partners,
derived from Alan Patricof Associates, cross-border. Patricof &
Co. changed its name to Apax in 2001.

Greycroft has helped New York’s venture industry gain
momentum in recent years. The city is home to Union Square
Ventures, which owns stakes in Twitter Inc. and Zynga Game
Network Inc. Accel Partners, one of the first investors in
Facebook Inc., announced plans to open a New York office last
month. FirstMark Capital, also based in New York, is one of two
venture firms that invested in Riot Games, which was bought last
week by China’s Tencent Holdings Ltd. for more than $350
million.